A promising new dawn is ours for the taking – so let’s stop counting the coal Australia must leave in the ground

Frank Jotzo, Australian National University and Mark Howden, Australian National UniversityA study out today says the vast majority of Earth’s coal, including 95% of Australia’s, cannot be burned if global warming is to be limited to 1.5℃ this century. The findings are undoubtedly true. But examining how much fossil fuel the world can still use is not the question we should be asking.

Instead, the most useful questions are: how do we advance Australia’s economic future outside high-emissions industries? And how can we seize the opportunities presented by the declines of coal, and then gas, rather than watching the economy go underwater as we try to stem an unstoppable tide?

The world is moving away fossil fuels, and there’s nothing Australia can do about it. Racing to dig up and sell whatever fossil fuels we can before the timer stops is not a future-proof strategy. We need to prepare for the change and diversify the economy.

How much coal must remain in the ground is beside the point. Instead, we should grasp this moment – turning it into a positive step for the world community and future generations.

Boy with painted hands — The key question is, how do we turn this moment into an opportunity?
Neil Hall/EPA

The numbers game

The new study by researchers at University College London examines how much fossil fuel can still be burned if we hope to keep the global average temperature rises to within 1.5℃ – the ambitious end of the Paris Agreement goals. It compares this “budget” with the known stores of coal, oil and gas in various parts of the world.

The study finds the vast majority of remaining fossil fuels must remain in the ground – specifically 89% of coal, 59% of gas and 58% of oil. For Australia, that equates to 95% of our coal reserves and 35% of our gas.

The research is a follow-up to a well-known 2015 study based on the 2℃ warming scenario. Similar findings have also been made in other research.

While it’s long been clear that much of Earth’s fossil fuel deposits must stay in the ground, there are uncertainties around the numbers. These come from varying assumptions about:

the exact size of the remaining global carbon budget for any particular temperature increase
how the carbon budget might be distributed between coal, oil and gas (which depends on technology choices and costs)
the extent of carbon capture and storage (or carbon use) and removal of carbon dioxide (CO₂) from the atmosphere
how much fossil fuel would be available for extraction.

The study released overnight offers results only from a single model and data set. The results remind us how little time remains to keep using fossil fuels, but we should not focus unduly on the headline numbers the study produced.

Vehicle carries coal at mine — It’s long been clear much of Earth’s coal deposits should stay in the ground.
Rob Griffith/AP

3 lenses on the end of the fossil fuel age

Just as the Stone Age didn’t end for a lack of stones, the fossil fuel age won’t end for a lack of coal, gas or oil.

So while humanity is not running out of fossil fuels, we are running out of options for the waste product, carbon dioxide – and running out of time to deal with it.

Countries that produce and export large amounts of fossil fuels must address this undeniable reality. We characterise three different ways they can do this.

The first is the “hell-for-leather” approach: extract, use and sell whatever fossil fuels you can while there’s still a market, and promote the global use of fossil fuels to extend the ride. This is the natural stance for companies focused solely on fossil fuel production.

Some countries that export fossil fuels are pursuing such strategies. In Australia, a statement by federal Resources Minister Keith Pitt this week can be interpreted along such lines.

In this mindset, remaining fossil fuel deposits should be exploited to the maximum, at whatever cost. It emphasises specific business interests, while defining national interests in narrow and short-sighted terms.

It also disregards the global climate change objective and international relations with countries that emphasise climate concerns. In short, it risks train wrecks down the track.

man in high-vis vest and blue shirt — Resources Minister Keith Pitt says the future of Australia’s coal sector is strong.
Aaron Bunch/AAP

A second approach is to concede fossil fuels are on a long-term downward trajectory, due to climate change concerns and rapid improvements in clean technologies. It accepts this change is driven by consumers and there is nothing fossil fuel exporters can do about it.

The logical consequence is to prepare for the inevitable decline and cushion the transition. That could include using some revenue from fossil fuels to invest in a socially and environmentally sensitive transition.

Under this approach, the amount of fossil fuel available underground is simply irrelevant. The deposits are redundant – just like all those stones were at the end of the Stone Age. The question of what proportion must remain unexploited is of no particular interest.

A third option is to understand the challenge as a positive one: take the global shift away from fossil fuels as an opportunity to modernise and massively diversify the economy.

Taking this perspective, leaving coal in the ground is a positive step that helps nations and regions evolve in desirable ways and helps the world community, and future generations, deal with climate change. Not mining coal, then, takes on an ethical dimension – perhaps it can be seen as “ethi-coal”.

two boys with arms around each other on cracked earth — The move away from fossil fuels can be seen as an opportunity to help future generations deal with climate change.
Shutterstock

Preparing for a post-fossil future

Whichever lens one chooses to look through, clean technologies will displace the burning of coal, oil and gas.

In Australia, large corporations (and to a lesser extent, some employees and public finances) have done well out of coal and gas. But that’s far from the only way we can derive large export revenues.

Australia is exceptionally well placed to build up an energy and processing industry based on its practically limitless renewable energy potential, coupled with experience with and predisposition towards large resource industries. This could include clean hydrogen and even green steel.

But to once again become dependent on just a few large industries, such as minerals or energy, should not be the goal here. Rather, we should use the global low-carbon transition as a platform for a large range of new industries. There are many opportunities in new technologies and practices.

So let’s keep our eye on the big picture: diversifying the economy into a broad range of activities with low environmental footprints, underpinned by modern infrastructure, top quality education and a strong social and health system.

Therein lies a desirable and economically sound future for Australia – one where we won’t be worrying one bit about all the coal left in the ground.

Frank Jotzo, Professor, Crawford School of Public Policy and Head of Energy, Institute for Climate Energy and Disaster Solutions, Australian National University and Mark Howden, Director, ANU Institute for Climate, Energy and Disaster Solutions, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Yes, it is entirely possible for Australia to phase out thermal coal within a decade

John Quiggin, The University of QueenslandAustralia has received seemingly contradictory messages about coal this week.

In a UK study published today in Nature, scientists found Australia must keep 95% of coal in the ground if we have any hope of stopping the planet warming beyond the crucial limit of 1.5℃.

These findings echo the message of senior United Nations official Selwin Hart, who earlier this week urged Australia to end the use of coal by 2030. He warned if the world doesn’t boost climate action urgently, Australia can expect more frequent and severe climate disasters such as droughts, heatwaves, fires and floods.

Meanwhile, markets for coal seem to be sending the opposite message.

The price of Newcastle thermal coal recently reached a record high of US$180 per tonne due to rising electricity demand in India, China and other Asian countries. That seems to suggest whatever the consequences, Australia and the world are not going to give up on coal or other carbon-based fuels.

But it’s a mistake to place too much weight on fluctuations in coal markets. Earlier this year, the price was about US$50 per tonne and seemed likely to fall further. The current price tells us nothing about the choices we face in reducing emissions by 2030.

It’s entirely feasible for Australia to phase out thermal coal by 2030 — we just need political will.

World economies must decarbonise

The authors of the new modelling study in Nature examined the world’s reserves of oil, gas and coal, and determined how much would have to be left untouched for at least a 50% chance of limiting global warming to 1.5℃.

Overall, it found nearly 60% of the world’s oil and fossil methane gas, and 90% of coal must remain unextracted by 2050. But the estimate for exporters like Australia is even higher.

This means production in most regions must peak now, or in the next decade, and that stronger policies are needed to restrict production and reduce demand.

The study reinforces how urgent it is to decarbonise economies. As Selwin Hart, the Special Advisor to the UN Secretary-General on Climate Action, noted in his speech to the Crawford Leadership Forum:

Decarbonisation of the global economy is quickly gathering pace. And there are huge opportunities to create more jobs, better health, and a stronger and fairer economy for those countries and companies that move first and fastest.

Is an end to coal feasible?

But would it really be possible for Australia to phase out coal by 2030, as Hart insists?

To consider this, it’s important to first distinguish between thermal coal and metallurgical coal. Thermal coal is used to generate electricity, while metallurgical coal is used in steelmaking.

Blast furnaces using metallurgical coal will ultimately be replaced by alternative technologies, such as using “green” hydrogen produced using clean electricity.

That process has begun, but it will take a long time, and can’t start until electricity generation is decarbonised. So, it makes sense to focus on phasing out thermal coal first.

But if decarbonisation of the global economy requires a rapid end to the use of thermal coal, why has its price suddenly surged?

A number of factors determine the thermal coal market, and fluctuations don’t tell us much about what the coal market will look like in 2030.

The recent increase in prices was caused by a combination of the rapid recovery from the pandemic recession, rising gas prices, weather-related disruptions to coal supply from Indonesia, and drought in China. It’s worth noting that despite high prices, the volume of seaborne thermal coal has actually declined.

95% of Australia’s coal must stay in the ground to cap the planet’s warming at 1.5℃
(AP Photo/Matthew Brown, File

Ending thermal coal in Australia would be easy

Given a modest amount of political will, or just the end of obstructionism from the federal government, Australia could easily replace coal-fired electricity generation with a combination of solar and wind, backed by storage.

Most of Australia’s coal-fired power plants were commissioned in the 20th century with obsolete sub-critical technology, and would be approaching the end of their operational lives even in the absence of climate change concerns.

Bringing those dates forward to 2030 or earlier could be almost costless. We could easily double our current rate of installation of utility-scale solar and wind generation, if the federal government got out of the way and let the states tackle the job.

Only five coal plants have been commissioned this century. The Bluewater plant in Western Australia has already been written off as worthless because of competition from solar and wind power.

The remaining four, all in Queensland, have a total capacity of less than 3 gigawatts. Allowing for the fact solar photovoltaic (PV) only operates in daylight hours, this is about the same as one million 10-kilowatt rooftop solar installations (about average for new installations). Queensland already has more than 750,000 solar rooftops, and capacity for another million.

More notably, the cost of decarbonising electricity supply is a fraction of the amount we have collectively spent to respond to the problem of the COVID-19 pandemic. Not only is COVID a smaller threat in the long run than climate change but a comprehensive response to pandemics requires us to stabilise the climate and stop the destruction of natural environments.

Managing the transition for the coal workforce would be more challenging, but still entirely feasible, as countries such as Spain and Germany have shown.

In a report I prepared for the Australia Institute last year, I found Australia could successfully transition the workforce with a mixture of measures including early retirement, retraining, and investments in renewable energy targeted at coal-dependent regions.

The cost of this would be around A$50 million a year, over ten years. That’s less than the estimated cost of a week of COVID lockdown in Sydney.

But would this condemn developing countries to energy poverty?

The reality is it makes economic and environmental sense for all countries to shift away from coal.

The central government in China has committed to reach net zero carbon emissions by 2060. But many provincial governments still see investment in coal plants and other polluting industries as an engine of growth, not to mention a lucrative source of kickbacks and donations.

The picture in India is similarly complex. Coal remains the main source of electricity, but most electricity generation businesses have abandoned new investments in coal-fired power and many have stopped bidding for access to domestic coal supplies.

We can’t do much to influence energy policy in China and India. But a commitment to reduce and ultimately eliminate exports of thermal coal would not, as some have suggested, condemn these and other developing countries to poverty.

Rather, it would strengthen the hand of advocates of clean energy against the established interest groups that defend coal.

John Quiggin, Professor, School of Economics, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Spain and Quitting Coal

India’s wicked problem: how to loosen its grip on coal while not abandoning the millions who depend on it

Vigya Sharma, The University of QueenslandIndia is the world’s third largest emitter of greenhouse gases, and its transition to a low-carbon economy is crucial to meeting the goals of the Paris Agreement. But unfortunately, the nation is still clinging firmly to coal.

Our new research considered this problem, drawing on a case study in the Angul district, India’s largest coal reserve in the eastern state of Odisha.

We found three main factors slowing the energy transition: strong political and community support for coal, a lack of alternative economic activities, and deep ties between coal and other industries such as rail.

India must step away from coal, while maintaining economic growth and not leaving millions of people in coal-mining regions worse off. Our research probes this wicked problem in detail and suggests ways forward.

people carry baskets filled with coal — India’s energy transition must ensure those living in poverty are not left behind.
Shutterstock

Why India matters

India’s population will soon reach 1.4 billion and this decade it is expected to overtake China as the world’s most populous nation. This, combined with a young population, growing economy and rapid urbanisation, means energy consumption in India has doubled since 2000.

The International Energy Agency (IEA) estimates India will have the largest increase in energy demand of any country between now and 2040.

An affordable, reliable supply of energy is central to raising the nation’s living standards. A recent World Bank analysis found up to 150 million people in India are poor.

Alongside its massive reliance on coal, India has one of the world’s most ambitious renewable energy plans, including an aim to quadruple renewable electricity capacity by 2030.

The IEA says coal accounts for about 70% of India’s electricity generation. And as the nation rebounds from the coronavirus pandemic this year, the rise in coal-fired electricity production is expected to be three times that from cleaner sources.

Coal-powered generation is anticipated to grow annually by 4.6% to 2024, and coal is expected to remain a major emitter of greenhouse gases to 2040.

While India’s energy trajectory remains aligned with its commitments under the Paris Agreement, the speed and readiness of its transition remains a complex, divisive issue. The World Economic Forum’s 2021 Energy Transition Index ranks India 87th out of 115 countries analysed.

students hold lights — India’s young, growing population is fuelling the nation’s energy demand.
EPA

Bottlenecks in the transition

Our research involved visits to the Angul district in Odisha in 2018 and 2019, where we conducted focus groups and interviews. Angul is home to 11 coal mines.

We found three crucial bottlenecks to the energy transition, which arguably exist in India’s other coal belts and could derail the nation’s decarbonisation efforts.

First, the Odisha government has historically been very pro-business. Politicians across the spectrum support coal mining and seek to position it as the region’s primary economic lifeline.

The official pro-coal position receives little pushback from Angul residents, who are largely unaware of Odisha’s contribution to national greenhouse gas emissions. Any local opposition to coal usually stems from concern about environmental degradation such as air, water and land pollution.

Most of Angul’s residents felt a deep connection to coal because their livelihood depends on it. One participant told us:

even if all the water is polluted and five inches of dust settles on our well, we would prefer mining to continue as my family’s survival depends on (the contract with the mining company).

Most participants considered their farming land as an asset to be sold to the mining companies for a significant sum. The money would, in turn, allow them to start a business, buy a car or arrange a marriage in the family.

people sit in dark room — Coal is important to the livelihoods of millions of Indian people.
AP

Second, the heavy reliance on coal means efforts to diversify the region’s economy have been grossly neglected.

In Angul, mining zones and coal-dedicated railway lines passing through paddy fields mean agricultural productivity has declined over time. Rural development agendas have been short-lived, often set within six months of an election deadline then changed or abandoned.

Skill-development programs in non-coal vocations have also been limited. This lack of viable alternatives implicitly generates local support for coal.

And third, a suite of industries in Odisha – such as steel, cement, fertiliser and bauxite – depend on cheap coal for power. This is reflected across India, where coal has deep ties with other industries in ways not seen elsewhere.

For example, in 2016 Indian Railways earned 44% of its freight revenue from transporting coal. Indian Railways is India’s largest employer and coal revenue helps keep passenger fares low. So in this way, a potential coal phaseout in India would have far-reaching effects.

people look out train window — Coal revenue helps subsidise train fares in India.
EPA

The way forward

We offer these pathways to ensure a steady, just energy transition in India:

India must help its coal regions diversify their economic activities
bipartisan support for a coal-free India is needed. Transition champions such as Germany can show India’s leaders the way
a national taskforce for energy transition should be established. It should include representatives from across industry and academia, as well as climate policymakers and grassroots organisations
India’s coal regions are endowed with metals needed in the energy transition, including iron ore, bauxite and manganese. With improved regulatory standards, these offer economic alternatives to coal
concerns about the coal phase-out from communities in coal regions should be addressed fairly and in a timely way.

The world’s emerging economies are responsible for two-thirds of global greenhouse gas emissions. The energy transition in India, if done well, could show the way for other developing nations.

But as new industrial sectors emerge and clean energy jobs grow, India must ensure those in coal-dependent regions are not left behind.

Vigya Sharma, Senior Research Fellow, Sustainable Minerals Institute, The University of Queensland

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Four seismic climate wins show Big Oil, Gas and Coal are running out of places to hide

Jacqueline Peel, The University of Melbourne; Ben Neville, The University of Melbourne, and Rebekkah Markey-Towler, The University of MelbourneThree global fossil fuel giants have just suffered embarrassing rebukes over their inadequate action on climate change. Collectively, the developments show how courts, and frustrated investors, are increasingly willing to force companies to reduce their carbon dioxide pollution quickly.

A Dutch court ordered Royal Dutch Shell to slash its greenhouse emissions, and 61% of Chevron shareholders backed a resolution to force that company to do the same. And in an upset at Exxon Mobil, an activist hedge fund won two seats on the company’s board.

The string of wins was followed in Australia on Thursday by a court ruling that the federal environment minister, when deciding whether or not to approve a new coal mine, owes a duty of care to young people to avoid causing them personal injury from climate change.

The court rulings are particularly significant. Courts have often been reluctant to interfere in what is viewed as an issue best left to policymakers. These recent judgements, and others, suggest courts are more prepared to scrutinise emissions reduction by businesses and – in the case of the Dutch court – order them to do more.

Shell, Chevron and Exxon logos — The wins for climate action put big polluters on notice.
AP

Court warns of ‘irreversible consequences’

In a world-first ruling, a Hague court ordered oil and gas giant Shell to reduce CO₂ emissions by 45% by 2030, relative to 2019 levels. The court noted Shell had no emissions-reduction targets to 2030, and its policies to 2050 were “rather intangible, undefined and non-binding”.

The case was brought by climate activist and human rights groups. The court found climate change due to CO₂ emissions “has serious and irreversible consequences” and threatened the human “right to life”. It also found Shell was responsible for so-called “Scope 3” emissions generated by its customers and suppliers.

The Chevron upset involved an investor revolt. Some 61% of shareholders supported a resolution calling for Chevron to substantially reduce Scope 3 emissions generated by the use of its oil and gas.

And last week, shareholders of ExxonMobil, one of the world’s biggest corporate greenhouse gas emitters, forced a dramatic management shakeup. An activist hedge fund, Engine No. 1, won two, and potentially three, places on the company’s 12-person board.

Engine No. 1 explicitly links Exxon’s patchy economic performance to a failure to invest in low-carbon technologies.

oil rig — The court said Shell’s emissions reduction efforts were ‘rather intangible’.
Shutterstock

Climate-savvy shareholders unite

As human activity causes Earth’s atmosphere to warm, large fossil fuel companies are under increasing pressure to act.

A mere 20 companies have contributed 493 billion tonnes of CO₂ and methane to the atmosphere, primarily from the burning of their oil, coal and gas. This equates to 35% of all global greenhouse gas emissions since 1965.

Shareholders – many concerned by the financial risks of climate change – are leading the corporate accountability push. The Climate Action 100+ initiative is a leading example.

It involves more than 400 investors with more than A$35 trillion in assets under management, who work with companies to reduce emissions, and improve governance and climate-related financial disclosures. Similar movements are emerging worldwide.

Shareholders in Australia are also stepping up engagement with companies over climate change.

Last year, shareholder resolutions on climate change were put to Santos and Woodside. While neither resolution achieved the 75% support needed to pass, both received unprecedented levels of support – 43.39% and 50.16% of the vote, respectively.

And in May 2021, Rio Tinto became the first Australian board to publicly back shareholder resolutions on climate change, which subsequently passed with 99% support.

Rio Tinto executives — The Rio Tinto board backed a shareholder resolution on climate change.
Brendan Esposito/AAP

The litigation trend

To date, the question of whether corporate polluters can be legally forced to reduce greenhouse emissions has remained unanswered. While fossil fuel companies have faced a string of climate lawsuits in the United States and Europe, courts have often dismissed the claims on procedural grounds.

Cases brought against governments have been more successful. In 2019, for example, the Dutch Supreme Court affirmed the government has a legal duty to prevent dangerous climate change.

The decision against Shell is significant, and sends a clear signal that corporations can be held legally responsible for greenhouse pollution.

Shell has previously argued it can only reduce its absolute emissions by shrinking its business. The recent case highlights how such companies may have to quickly find new forms of revenue, or face legal liability.

It’s unlikely we’ll see identical litigation in Australia, because our laws are different to those in the Netherlands. But the Shell case is emblematic of a broader trend of climate litigation being brought to challenge corporate polluters.

This includes the case decided on Thursday involving young people opposed to a company’s coal mine expansion, and Australian cases arguing for greater disclosure of climate risk by corporations, banks and super funds.

teenagers involved in case — The case brought against the Australian government by a group of teenagers is part of a growing trend towards climate litigation.
Supplied

Change is nigh

Oil and gas companies often argue Scope 3 emissions are not their responsibility, because they don’t control how customers use their products. The Shell finding and shareholder action against Chevron suggest this claim may hold little sway with courts or shareholders in future.

The Shell case may also set off a global avalanche of copycat litigation. In Australia, legal experts have noted the turning tide, and warned is it’s only a matter of time before directors who fail to act on climate change face litigation.

Clearly, a seismic shift is looming, in which corporations will be forced to take greater responsibility for climate harms. These recent developments should act as a wake-up call for oil, gas and coal companies, in Australia and around the world.

Jacqueline Peel, Professor of Environmental and Climate Law, The University of Melbourne; Ben Neville, Senior Lecturer and Program Director of the Master of Commerce, The University of Melbourne, and Rebekkah Markey-Towler, Research fellow, Melbourne Climate Futures, The University of Melbourne

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Paying Australia’s coal-fired power stations to stay open longer is bad for consumers and the planet

Daniel J Cass, University of Sydney; Joel Gilmore, Griffith University, and Tim Nelson, Griffith UniversityAustralian governments are busy designing the nation’s transition to a clean energy future. Unfortunately, in a misguided effort to ensure electricity supplies remain affordable and reliable, governments are considering a move that would effectively pay Australia’s old, polluting coal-fired power stations to stay open longer.

The measure is one of several options proposed by the Energy Security Board (ESB), the chief energy advisor to Australian governments on electricity market reform. The board on Friday released a vision to redesign the National Electricity Market as it transitions to clean energy.

The key challenges of the transition are ensuring it is smooth (without blackouts) and affordable, as coal and gas generators close and are replaced by renewable energy.

The redesign has been two years in the making. The ESB has done a very good job of identifying key issues, and most of its recommendations are sound. But its option to change the way electricity generators and retailers strike contracts for electricity, if adopted, would be highly counterproductive – bad both for consumers and for climate action.

Electricity lines at sunset — One proposed reform to Australia’s electricity market would be bad for consumers and climate action.
Shutterstock

The energy market dilemma

The National Electricity Market (NEM) covers every Australian jurisdiction except Western Australia and the Northern Territory. It comprises electricity generators, transmission and distribution networks, electricity retailers, customers and a financial market where electricity is traded.

Electricity generators in the NEM comprise older, polluting technology such as gas- and coal-fired power, and newer, clean forms of generation such as wind and solar. Renewable energy, which makes up about 23% of our electricity mix, is now cheaper than energy from coal and gas.

Wind and solar energy is “variable” – only produced when the sun is shining and the wind is blowing. Technology such as battery storage is needed to smooth out renewable energy supplies and make it “dispatchable”, meaning it can be delivered on demand.

Some say coal generators, which supply dispatchable electricity, are the best way to ensure reliable and affordable electricity. But Australia’s coal-fired power stations, some of which are more than 40 years old, are becoming more prone to breakdowns – and so less reliable and more expensive – as they age. This has led to some closing suddenly.

Without a clear national approach to emissions targets, there’s a risk these sudden closures will occur again.

Wind farm near coast — Wind and solar energy is variable.
Shutterstock

So what’s proposed?

To address reliability concerns, the ESB has proposed an option known as the “physical retailer reliability obligation”.

In a nutshell, the change would require electricity retailers to negotiate contracts for a certain amount of “dispatchable” electricity from specific generators for times of the year when reliability is a concern, such as the peak weeks of summer when lots of people use air conditioning.

Currently, the Australian Energy Market Operator has reserve electricity measures it can deploy when market supply falls short.

But under the new obligation, all retailers would also have to enter contracts for dispatchable supply. This would likely require buying electricity from the coal generators that dominate the market. This provides a revenue source enabling these coal plants to remain open even when cheaper renewable energy makes them unprofitable.

The ESB says without the change, the closure of coal generators will be unpredictable or “disorderly”, creating price shocks and reliability risks.

hand turns off light switch in bedroom — The ESWB says the recommendation would address concerns over electricity reliability.
Shutterstock

A big risk

Even the ESB concedes the recommendation comes with considerable risks. In particular, the board says it may:

impose increased barriers to retail competition and product innovation
lead to possible overcompensation of existing coal and gas generators.

In short, the policy could potentially lock in increasingly unreliable, ageing coal assets, stall new investment in new renewable energy storage such as batteries and pumped hydro and increase market concentration.

It could also push up electricity prices. Electricity retailers are likely to pass on the cost of these new electricity contracts to consumers, no matter how much energy that household or business actually used.

The existing market already encourages generators to provide reliable supply – and applies strong penalties if they don’t. And in fact, the NEM experiences reliability issues for an average of just one minute per year. It would appear little could be added to the existing market design to make generators more reliable than they are.

Finally, the market is dominated by three large “gentailers” – AGL, Energy Australia and Origin – which own both generators and the retail companies that sell electricity. The proposed change would disadvantage smaller electricity retailers, which in many cases would be forced to buy electricity from generators owned by their competitors.

Australia’s gentailers are heavily invested in coal power stations. The proposed change would further concentrate their market power while propping up coal.

warning sign on fence — The proposed change brings a raft of risks to the electricity market.
Kelly Barnes/AAP

What governments should do

If coal-fired power stations are protected from competition, it will deter investment in cleaner alternatives. The recommendation, if adopted, would delay decarbonisation and put Australia further at odds with our international peers on climate policy.

The federal and state governments must work together to develop a plan for electricity that facilitates clean energy investment while controlling costs for consumers.

The plan should be coordinated across the states. Without this, we risk creating a sharper shock later, when climate diplomacy requires the planned retirement of coal plants. Other nations have acknowledged the likely demise of coal, and it’s time Australia caught up.

Daniel J Cass, Research Affiliate, Sydney Business School, University of Sydney; Joel Gilmore, Associate Professor, Griffith University, and Tim Nelson, Associate Professor of Economics, Griffith University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Is Malcolm Turnbull the only Liberal who understands economics and climate science – or the only one who’ll talk about it?

Richard Denniss, Crawford School of Public Policy, Australian National UniversityYesterday, former Liberal prime minister Malcolm Turnbull was unceremoniously dumped as chair of the New South Wales government’s climate advisory board, just a week after being offered the role. His crime? He questioned the wisdom of building new coal mines when the existing ones are already floundering.

No-one would suggest building new hotels in Cairns to help that city’s struggling tourism industry. But among modern Liberals it’s patently heresy to ask how rushing to green light 11 proposed coal mines in the Hunter Valley helps the struggling coal industry.

Coal mines in the Hunter are already operating well below capacity and have been laying off workers in the face of declining world demand for coal, plummeting renewable energy prices and trade sanctions imposed by China. The problem isn’t a shortage of supply, but an abundance.

The simple truth is building new coal mines will simply make matters worse, especially for workers in existing coal mines that have already been mothballed or had their output scaled back.

coal mine in the Hunter Valley — Turnbull has called for a moratorium on new coal mines in the Hunter Valley, such as the one pictured above.
Dean Lewins/AAP

It gets worse. Once an enormous, dusty, noisy open cut coal mine is approved, the agriculture, wine, tourism and horse breeding industries – all major employers in the Hunter Valley – are reluctant to invest nearby. While building new coal mines hurts workers in existing coal mines, the mere act of approving new coal mines harms investment in job creation in the industries that offer the Hunter a smooth transition from coal.

The NSW planning department doesn’t have a plan for how many new coal mines are needed to meet world demand. Nor does it have a plan for how much expansion of rail and port infrastructure is required to meet the output of all the new mines being proposed.

That’s why my colleagues and I recently called for a moratorium on new coal mines in the Hunter until such plans were made explicit. Just as you wouldn’t approve 1,000 new homes in a town where the sewerage system was already at capacity, it makes no sense to approve 11 new coal mines in a region that couldn’t export that much coal if it tried.

But if there’s one thing that defines the debate about coal in Australia, its that it makes no sense.

Just as it made no sense for then-treasurer Scott Morrison to wave a lump of coal around in parliament in 2017, it makes no sense for right-wing commentators to pretend approving new mines will help create jobs in coal mining. And it makes no sense for the National Party to ignore the pleas of farmers to protect their land from the damage coal mines do.

Scott Morrison with a lump of coal to Question Time in 2017. — Scott Morrison took a lump of coal to Question Time in 2017.
Lukas Coch/AAP

On the surface, Turnbull’s support for a pause on approving new mines while a plan is developed is old-fashioned centrism. It protects existing coal workers from new, highly automated mines, it protects farmers and it should make those concerned with climate change at least a bit happy. Win. Win. Win.

But there’s no room for a sensible centre in the Australian coal debate. And when someone even suggests the industry might not be set to grow, its army of loyal parliamentary and media supporters swing into action.

Labor’s Joel Fitzgibbon said Turnbull “wants to make the Upper Hunter a coal-mine-free zone”. The Nationals’ Matt Canavan suggested stopping coal exports was “an inhumane policy to keep people in poverty”. The head of the NSW Minerals Council suggested 12,000 jobs were at risk.

But of course, the opposite is true. Turnbull’s proposal to protect existing coal workers from competition from new mines would save jobs, not threaten them. He didn’t suggest coal mines be shut down tomorrow, or even early. And, given existing coal mines are running so far below capacity, his call has no potential to impact coal exports.

Predictably, the Murdoch press ran a relentlessly misleading campaign in support of the coal industry and in opposition to their least favourite Liberal PM. But surprisingly, the NSW government rolled over in record time.

While the government might think appeasing the coal industry will play well among some older regional voters, they must know such kowtowing is a gift to independents such as Zali Steggall, and a fundamental threat to inner-city Liberals such as Dave Sharma, Jason Falinski and Trent Zimmerman.

The decision to dump Turnbull might have bought NSW Premier Gladys Berejiklian some respite from attacks from the Daily Telegraph. But such denial of economics and climate science will provide no respite for existing coal workers in shuttered coal mines or the agriculture and tourism industry that is looking to expand.

No doubt the National Party are pleased with their latest scalp. But it must be remembered this is the party that last year wanted to wage a war against koalas on behalf of property developers. Such political instincts might help the Nationals fend off the threat from One Nation in regional areas but it does nothing to retain votes in leafy Liberal strongholds that deliver most Liberal seats.

Richard Denniss, Adjunct Professor, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Electricity has become a jigsaw. Coal is unable to provide the missing pieces

Peter Martin, Crawford School of Public Policy, Australian National University

There’s something the energy minister said when they announced the early closure of Victoria’s second-biggest coal-fired power station last week that was less than complete.

Yallourn, in the Latrobe Valley, provides up to 20% of Victoria’s power. It has been operating for 47 years. Since late 2017 at least one of its four units has broken down 50 times. Its workforce doubles for three to four months most years to deal with the breakdowns. It pumps out 3% of Australia’s carbon emissions.

On Wednesday Energy Australia gave seven years notice of its intention to close it in mid-2028, four years earlier than previously announced, a possibility for which regulators had been preparing.

In what might have been a rhetorical flourish, Energy Minister Angus Taylor warned of “price spikes every night when the sun goes down”.

Then he drew attention to what had happened when two other coal-fired power stations closed down — Victoria’s Hazelwood and South Australia’s Northern (South Australia’s last-remaining coal-fired generator).

He said “wholesale prices skyrocketed by 85%”.

And there he finished, without going on to detail what really mattered. South Australia and Victoria now have the lowest wholesale power prices in the National Electricity Market — that’s right, the lowest.

Coal-fired plants close, then prices fall

Before Northern closed, South Australia had Australia’s highest price.

Five years after the closure of Northern in 2016, and four years after the closure of Hazelwood in 2017, South Australia and Victorian have wholesale prices one-third lower than those in NSW and two-fifths lower than those in Queensland.

Something happened after the closure (largely as a result of the closure) that forced prices down.

South Australia became a renewables powerhouse.

South Australian wind projects congregate around power lines.
AEMO

The Australian National University’s Hugh Saddler points out that renewable-sourced power — wind and grid solar — now accounts for 62% of power supplied to the South Australian grid, and at times for all of it.

Much of it is produced near Port Augusta, where the Northern and Playford coal-fired power stations used to be, because that’s where the transmission lines begin.

Being even cheaper than the power produced by the old brown-coal-fired power stations, there is at times so much it that it sends prices negative, meaning generators get paid to turn off in order to avoid putting more power into the system than users can take out.

It’s one of the reasons coal-fired plants are closing: they are hard to turn off. They are just as hard to turn on, and pretty hard to turn up.

Coal can’t respond quickly

There are times (when the wind doesn’t blow and there’s not much sun, such as last Friday in South Australia) when prices can get extraordinarily high.

But coal-fired plants, especially brown-coal-fired plants such as Victoria’s Hazelwood and Yallourn and Victoria’s two remaining big plants, Loy Yang A and B, are unable to quickly ramp up to take advantage of them.

Although “dispatchable” in the technical meaning of the term used by the minister, coal-fired stations can’t fill gaps quickly.

Batteries can respond instantly to a loss of power from other sources (although not for very long), hydro can respond in 30 to 70 seconds, gas peaking plants can respond within minutes.

But coal can barely move. As with nuclear power, coal-fired power needs to be either on (in which case it can only slowly ramp up) or off, in which case turning it on from a standing start would be way too slow.

What was a feature is now a bug

That’s why coal-fired generators operate 24-7, to provide so-called base-load, because they can’t really do anything else.

Snowy Hydro generators can be turned on and off at will.
Alex Ellinghausen/AAP

Brown coal generators are the least dispatchable. Brown coal is about 60% water. To make it ignite and keep boiling off the water takes sustained ultra-high temperatures. Units at Yallourn have to keep burning coal at high output (however low or negative the prices) or turn off.

In the days when the other sources of power could be turned on and off at will, this wasn’t so much of a problem.

Hydro or gas could be turned on in the morning when we turned on our lights and heaters and factories got down to business, and coal-fired power could be slowly ramped up.

At night, when there was less demand for coal-fired power, some could be created by offering cheap off-peak water heating.

But those days are gone. Nationwide, wind and solar including rooftop solar supplies 20% of our needs. It turns on and off at will.

Wind often blows strongly at night. What was a feature of coal — its ability to provide steady power rather than fill gaps – has become a bug.

Gas and batteries can fill gaps coal can’t

It’s as if our power system has become a jigsaw with the immovable pieces provided by the wind and the sun. It’s our job to fill in the gaps.

To some extent, as the prime minister says, gas will be a transition fuel, able to fill gaps in a way that coal cannot. But gas has become expensive, and batteries are being installed everywhere.

Energy Australia plans to replace its Yallourn power station with Australia’s first four-hour utility-scale battery with a capacity of 350 megawatts, more than any battery operating in the world today. South Australia is planning an even bigger one, up to 900 megawatts.

Australia’s Future Fund and AGL Energy are investing $2.7 billion in wind farms in NSW and Queensland which will fill gaps in a different way — their output peaks at different times to wind farms in South Australia and Victoria.

Filling the gaps won’t be easy, and had we not gone down this road there might still have been a role for coal, but the further we go down it the less coal can help.

As cheap as coal-fired power is, it is being forced out of the system by sources of power that are cheaper and more dispatchable. We can’t turn back.

Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

Forget about the trade spat – coal is passé in much of China, and that’s a bigger problem for Australia

Hao Tan, University of Newcastle; Elizabeth Thurbon, UNSW; John Mathews, Macquarie University, and Sung-Young Kim, Macquarie University

Australian coal exports to China plummeted last year. While this is due in part to recent trade tensions between Australia and China, our research suggests coal plant closures are a bigger threat to Australia’s export coal in the long term.

China unofficially banned Australian coal in mid-2020. Some 70 ships carrying Australian coal have reportedly been unable to unload in China since October.

This is obviously bad news for Australia’s coal exporters. But even if the ban is lifted, there’s no guarantee China will start buying Australian coal again – at least not in huge volumes.

China is changing. It’s announced a firm date to reach net-zero emissions, and governments in eastern provinces don’t want polluting coal plants taking up prime real estate. It’s time Australia faced reality, and reconsidered its coal export future.

Coal ship unloads at Chinese port — China’s coal import quotas are hurting Australian exporters.
Wang Kai/AP

First, the coal ban

In May last year, China’s government effectively banned the import of Australian coal, by applying stringent import quotas. As of last month coal exports to China from Newcastle, Australia’s busiest coal exporting port, had ceased.

In 2019, Australia exported A$13.7 billion worth of coal to China. This comprised A$9.7 billion in metallurgical coal for steel making and A$4 billion in thermal coal for electricity generation.

The latest official Australian data shows these export levels fell dramatically between November 2019 and November 2020. Comparing the two months, metallurgical and thermal coal exports to China were down 85% and 83% respectively.

Several Chinese provinces experienced power blackouts in late 2020. China’s state-backed media said the shortages were unrelated to the ban on Australian coal. Instead, they blamed cold weather and the recovery in industrial activity after the pandemic.

We dispute this claim. While Australian coal accounts for only about 2% of coal consumption in China, it helps maintain reliable supply for many power stations in China’s southeast coastal provinces.

Coal mining in China mostly occurs in the western provinces. Southeast coastal provinces are largely economically advanced and no longer produce coal. Instead, power stations in those provinces import coal from overseas.

This coal is cheaper than domestic coal, and often easier to access; transport bottlenecks in China often hinder the movement of domestic coal.

Coal mine at Gunnedah in NSW — Australian thermal coal helps supplement China’s domestic supply.
Rob Griffith/AP

Beyond the trade tensions

Experience suggests trade tensions between Australia and China will eventually ease. But in the long run, there is a more fundamental threat to Australian coal exports to China.

Data from monitoring group Global Coal Tracker shows between 2015 and 2019, China closed 291 coal-fired power generation units in power plants of 30 megawatts (MW) or larger, totalling 37 gigawatts (GW) of capacity. For context, Australia decommissioned 5.5 GW of coal-fired power generation units between 2010 and 2017, and currently has 21 GW of coal-fired power stations.

The closures were driven by factors such as climate change and air pollution concern, excess coal power capacity, and China’s move away from some energy-intensive industries.

Our recently published paper revealed other distinctive features of the coal power station closures.

First, China’s regions are reducing coal power capacity at different rates and scales. In the nation’s eastern provinces, the closures are substantial. But elsewhere, and particularly in the western provinces, new coal plants are being built.

In fact, China’s coal power capacity increased by about 18% between 2015 and 2019. It currently has more than 1,000 GW of coal generation capacity – the largest in the world.

Second, we found retired coal power stations in China had much shorter lives than the international average. Guangdong, an economically developed region of comparable economic size to Canada, illustrates the point. According to our calculation, the stations in that region had a median age of 15 years at closure. In contrast, coal plants that closed in Australia between 2010 and 2017 had a median age of 43 years.

coal plant in China — Coal plant closures have been most marked in China’s east.
AP

This suggests coal power stations in China are usually retired not because they’ve reached the end of their productive lives, but rather to achieve a particular purpose.

Third, our study showed decisions to decommission coal power stations in China were largely driven by government, especially local governments. This is in contrast to Australia, where the decision to close a plant is usually made by the company that owns it. And this decomissioning in China is usually driven by a development logic.

Coal plant closures there have been faster and bigger than elsewhere in the country, as governments replace energy- and pollution-intensive industries with advanced manufacturing and services.

And as these regions become richer, the value of land occupied by coal power plants and transmission facilities grows. This gives governments a strong incentive to close the plants and redevelop the sites.

In coming years, southeast China will increasingly shift to renewable-based electricity and electric power transmitted from western provinces.

Man covers mouth — Air pollution concerns are helping drive China’s move away from coal-burning for power.
Ng Han Guan/AP

Securing our energy future

Coal power stations in China’s eastern coastal regions will continue to close in coming years, and power generation capacity will be redistributed to western provinces. For reasons outlined above, that means power generation in China will increasingly rely on domestic coal rather than that from Australia.

China’s coal exit is in part due to its strategy to peak its carbon emissions before 2030 and achieve net-zero by 2060. Australia must realistically appraise its coal export prospects in light of the long-term threat posed by shifts in China and other East Asian nations.

The Morrison government, and industry, should re-double efforts to rapidly expand renewable energy in Australia. Then we can leave coal behind, and emerge as a renewable energy superpower.

Hao Tan, Associate professor, University of Newcastle; Elizabeth Thurbon, Scientia Associate Professor in International Relations / International Political Economy, UNSW; John Mathews, Professor Emeritus, Macquarie Business School, Macquarie University, and Sung-Young Kim, Senior Lecturer in International Relations, Discipline of Politics & International Relations, Macquarie School of Social Sciences, Macquarie University

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The Paris Agreement 5 years on: big coal exporters like Australia face a reckoning

Jeremy Moss, UNSW

On Saturday, more than 70 global leaders came together at the UN’s Climate Ambition Summit, marking the fifth anniversary of the Paris Agreement.

Prime Minister Scott Morrison was denied a speaking slot, in recognition of Australia’s failure to set meaningful climate commitments. Meanwhile, the European Union and the UK committed to reduce domestic emissions by 55% and 68% respectively by 2030.

As welcome as these new commitments are, the Paris Agreement desperately needs to be updated. Since it was passed, the production and supply of fossil fuels for export has continued unabated. And the big exporters — such as Norway, Canada, the US, Russia, Saudi Arabia and of course Australia — take no responsibility for the emissions created when those fossil fuels are burned overseas.

It’s time this changed. Australia is the world’s biggest coal exporter. And in 2019, emissions from fossil fuels exported by this nation, as well as the US, Norway and Canada, accounted for more than 10% of total world emissions, according to calculations from a research project on Australia’s carbon budget at the University of NSW, which I run. Exporting nations are not legally responsible for these offshore emissions, but their actions are clearly at odds with the climate emergency.

Business as usual

A 2019 UN report notes governments are planning to extract 50% more fossil fuels than is consistent with meeting a 2℃ target and an alarming 120% more than a 1.5℃ target, by 2030. Coal is the main contributor to this supply overshoot.

UN Secretary-General António Guterres urged all leaders to declare a climate emergency.

But rather than reducing their production of fossil fuels, many countries are doubling down and actually increasing supply. For example, in Australia, government figures show the greenhouse gas emissions from Australia’s exported fossil fuels increased by 4.4% between 2018 to 2019.

Australia is the world’s largest coal exporter and approved three new fossil fuel projects in recent months: the Vickery coal mine extension, Olive Downs and the Narrabri Gas Project

This is a worldwide trend. Let’s take Norway as another example. Norway gets the bulk of its electricity from hydropower and has partially divested its Government Pension Fund from some fossil fuels. Yet it’s also one of the largest exporters of greenhouse gases through its gas exports, behind Qatar and Russia.

The situation is mirrored in the corporate world. Many large fossil fuel companies are trumpeting their emissions reductions targets while continuing to push for new fossil fuel mining projects. BHP, one of the world’s biggest miners, stated it is reducing its emissions, yet in October the company increased its stake in an oil field in the Gulf of Mexico.

Responsibility doesn’t stop at the border

What underpins this situation is an outdated “territorial” model of responsibility for climate harms. Governments and companies seem to think responsibility stops at the border, not with the overall livability of the global climate. Once the coal, oil and gas products are loaded onto ships, they are no longer our problem.

Unfortunately, the accounting rules of the United Nations, under the Paris Agreement, currently allow exporters to pass on responsibility for fossil fuel emissions.

We must move from this territorial model of responsibility to one that considers the whole chain of responsibility for climate harms.

So what should Australia, Canada, the US, Norway and other exporting countries do to address the over-supply of fossil fuels?

First, they need to acknowledge their responsibility, at least in part, for the emissions and associated harms caused by their exports. Allowing compensation and funding for mitigation to track the role played in the causal chain better attributes responsibility and places mitigation burdens back on the exporting countries.

Future climate negotiations, such as in Glasgow in 2021 (COP26), need to adjust the scope of their targets to include robust reductions in the supply of fossil fuels in the next round of agreements.

Instead of just focusing on reducing demand, the process needs to function as a kind of “reverse OPEC” (the Organisation of the Petroleum Exporting Countries), where exporting countries are given ambitious phase-out targets for their fossil fuel exports.

Drastic emissions cuts needed

The 2020 Production Gap report notes global fossil fuel production will have to decrease by 6% a year between 2020-30 to meet a 1.5℃ target.

For Australia, this must mean we include the reduction in “exported emissions” as part of any net-zero target. Australia’s exported emissions are double our domestic emissions – a situation that cannot continue.

Top of the list of what’s needed, is the phasing out of generous subsidies for fossil fuel producers. The billions of dollars currently spent annually in Australia on subsidising and encouraging fossil fuel exports are simply not compatible with the aims and spirit of the Paris Agreement.

Phasing out the supply of fossil fuels also needs to occur in a way that doesn’t just pay the current big suppliers to stop. Governments implementing a transition ought to think very carefully about how to fairly deploy scarce resources to ensure a just transition.

Last but not least, governments need to accept that the strong influence fossil fuel corporations wield over the political process is hindering global efforts to address climate change. The donations , rotation of industry staff to government positions and influence of fossil fuel lobby groups cannot lead to good decisions for the climate.

Placing a ban on such influence, particularly at future climate negotiations, would go a long way towards addressing the undue influence of the fossil fuel industry.

Until the fossil fuel export industry is subject to demanding targets, and made to accept responsibility for the emissions associated with their products, Earth will continue on its highly dangerous global warming trajectory.

Jeremy Moss, Professor of Political Philosophy, UNSW

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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3 lenses on the end of the fossil fuel age

Preparing for a post-fossil future

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World economies must decarbonise

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Ending thermal coal in Australia would be easy

But would this condemn developing countries to energy poverty?

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Why India matters

Bottlenecks in the transition

The way forward

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Court warns of ‘irreversible consequences’

Climate-savvy shareholders unite

The litigation trend

Change is nigh

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The energy market dilemma

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A big risk

What governments should do

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Coal-fired plants close, then prices fall

Coal can’t respond quickly

What was a feature is now a bug

Gas and batteries can fill gaps coal can’t

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First, the coal ban

Beyond the trade tensions

Securing our energy future

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Business as usual

Responsibility doesn’t stop at the border

Drastic emissions cuts needed

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